Michelle Singletary: Don't fall for student loan relief scams

This month, the Consumer Financial Protection Bureau released its annual Student Loan Ombudsman Report. The consumer watchdog agency said it has handled 20,600 federal and private student loan complaints from September 2016 through August 2017.

If you're in the market to buy a home, you might hear a real estate professional say it's all about "location, location, location."

Those in the business of deceit also look for the best location — but not necessarily a physical place. For scammers, it's all about where they'll get the most money victimizing people. And one of the hottest places to be right now involves student loans, which are at an all-time high of $1.4 trillion.

Lots of folks are struggling to handle education debt. Even those who are managing their loan payments want out — and fast.

This month, the Consumer Financial Protection Bureau released its annual Student Loan Ombudsman Report. The consumer watchdog agency said it has handled 20,600 federal and private student loan complaints from September 2016 through August 2017. During the same period, the bureau handled about 2,300 debt-collection complaints about private and federal student loans.

The CFPB says it's been able to return $750 million since 2011 to borrowers harmed by dishonest practices and loan-servicing failures.

Borrowers complained about overly aggressive — and, in some cases, illegal — debt-collection practices. For example, a debt collector can offset federal loan payments by attaching Social Security retirement payments. This is not the case with private student loans.

If you've got a loan issue, the CFPB may be able to help. You can submit a complaint online at consumerfinance.gov.

Last week, I was happy to see that the Federal Trade Commission has partnered with 11 states and the District of Columbia to combat deceptive student debt-relief scams. The crackdown is called "Operation Game of Loans."

As a fan of the Game of Thrones books and HBO series (rated TV-MA), I think the campaign enforcement title is spot-on. Throughout the series, the characters in this fantasyland dread the looming cold, harsh season, which requires preparation and vigilance.

"Winter is coming for debt-relief scams that prey on hardworking Americans struggling to pay back their student loans," said Maureen K. Ohlhausen, acting chairman of the FTC.

The agency highlighted actions it has taken against a few companies recently. In one case, a Florida-based business, which falsely claimed it was affiliated with the Department of Education, allegedly bilked borrowers out of at least $11 million by promising to forgive their loans, lower payments and reduce interest rates. Another company allegedly took more than $20 million from consumers by charging illegal upfront fees of up to $1,000.

Under the Telemarking Sales Rule, companies offering debt-relief services cannot charge upfront fees. It's illegal to collect money from customers before the company has been able to settle or reduce their debts.

I get it. The debt is overwhelming for many borrowers, and that makes them susceptible to debt-relief scams. The CFPB says more than 1.2 million borrowers defaulted in 2016.

One person I was working with through my church financial ministry panicked about the amount of student loans she's carrying. She agreed to pay a debt-relief company $1,600. When I found out about it, I asked to see her contract.

I was incredulous. Basically, all the company was going to do is explore the federal repayment programs. Her contract literally said they would do this by "using publicly available information" found on the student aid website run by the Department of Education.

Then it promised to "secure documentation on behalf of the client to apply for the available program or programs through the DOE" and "maintain the client's file throughout the duration of the DOE repayment obligation."

There were many red flags in the contract, including asking that the woman provide her Federal Student Aid Identification (the shorthand is FSA ID), which is the username and password used to log on to DOE websites. You should not give this information to anyone. Thankfully, the woman told me about the contract in time for her to back out of the arrangement.

While there are legitimate companies who offer services to help you navigate repayment options, why pay for something that you can do for yourself — for free — if you're already in debt?

If you've got a federal loan and need guidance, go to StudentAid.gov/repay — the same place the debt-relief companies go — for free information about repayment and forgiveness programs. Check out ftc.gov for tips on how to spot a student loan debt relief scam.

This coming winter, scammers will be on the prowl for new victims as a new crop of borrowers begin their student loan payments, after having had a six-month grace period following their spring graduations from college.

If you've got student loans, don't let your desperation for relief lure you into falling for a scam.